IRS Investigation Into UBS Tax Evasion Case Expands

According to a report in the Wall Street Journal the Internal Revenue Service (IRS) now believes that the number of UBS clients who hold offshore accounts is higher than the 17,000 originally reported. The IRS believes that UBS helped these clients commit tax fraud by helping them hide their income from the IRS. According to the article UBS is in talks with the Department of Justice to avoid possible felony indictments by paying a penalty in the rage of 1.2 billion dollars.

UBS become front page news when a former UBS executive told the IRS that UBS routinely advised its customers that they weren’t required to disclose their Swiss bank accounts to the IRS. Of course that was a bad bit of advice which could expose people to tax evasion and related charges since U.S. citizens are required to make a disclosure of their offshore bank accounts in two places. First, on Schedule B of their Form 1040 in response to question 7a “At any time during 2008, did you have an interest in or a signature or other authority over a financial account in a foreign country, such as a bank account, securities account, or other financial account?” Second, holders of foreign bank accounts must report their existence on Form TDF 90-22.1.

In July 2008 a District Court judge in Miami granted an IRS summons to turn over the records with the names of US taxpayers who requested their accounts be kept hidden from the IRS. Clearly such records would be part of a chain of evidence that the IRS could use to bring tax evasion charges. UBS has yet to turn over the records, and according to the Journal the IRS is considering whether to ask the judge for an additional order forcing the turnover of the records.